Some readers from Minnesota may wish to learn more about the actions available to unsecured debt collection agencies. Collection agencies working with a secured debt generally have the option of seizing assets such as homes in order to procure payment, but this option is not immediately available if the debt is unsecured. However, collection agencies working with unsecured debt may nevertheless be able to compel forfeiture in some cases.
An unsecured creditor may initiate a debt collection lawsuit against someone in order to claim ownership of assets they can use as collateral. For example, although real estate property may not have been used as collateral in the original loan transaction, a creditor may nevertheless attain the right to seize such assets through litigation if the loan was not repaid. In addition, a creditor may also be able to levy wages and bank accounts under similar circumstances.
If an unsecured creditor attains a judgment lien on a piece of real estate property, they may not take action on it immediately. In some cases, the lien could be allowed to stand for many years, during which time the property owner will be unable to exercise his or her full ownership rights, such as being free to sell the property at a time of their choosing. However, a creditor may also initiate a writ of execution, which can allow them to seize and sell any real estate assets in question, including a debtor's home in some cases.
Someone who is facing overwhelming debt may wish to contact an attorney to have their situation reviewed. Some debt collection practices are illegal, and an attorney may be able to review the contacts between their client and applicable collection agencies for improprieties. In some cases, it may be possible to mitigate creditor harassment by negotiating plans for repayment or filing for bankruptcy.
Source: SF Gate, "Can Unsecured Creditors Collect Their Debt from the Sale of My Home?", Ciele Edwards, December 12, 2014